Key overnight events:
- The International Energy Agency affirmed that Iran has curbed its ability to develop nuclear weapons, fulfilling its part of the nuclear deal it struck with the US and 5 other nations. Thus, freeing the world’s fourth-largest holder of crude oil reserves from economic sanctions.
- Crude oil futures extended declines to a low of $28.36/bbl this morning. Brent oil futures fared worse, trading below $28/bbl to reach a low of $27.67/bbl.
- Iran’s deputy oil minister announced that the government will commence efforts to boost oil output and exports by 500,000 barrels a day.
- Most major indices across the US and Europe declined 2-3% by Friday’s close, fuelled by declining oil prices and disappointing manufacturing and industrial production data in the US. The risk-off theme continued into Asia this morning with most indices opening in the red.
- Spot 1.4392
- Non-oil exports for December fell 7.2% year-on-year, weaker than the 4.4% decline expected.
- USDSGD has continued to consolidate around its 1.4400 handle.
- Spot 0.6902
- Oil’s decisive break below the $30/bbl level has resulted in big moves for most commodity currencies, and the Australian dollar was no exception.
- AUDUSD fell to its lowest in more than 6 years to 0.6827. Should the previous support-turned-resistance of 0.6900 hold, we could potentially witness the currency pair testing the next support at 0.6500.
- Spot 1.4522
- The Canadian dollar, another commodity currency, weakened to its lowest in almost 13 years. USDCAD soared to a high of 1.4660 early this morning.
- The odds of a 20th Jan rate cut by the Bank of Canada have risen to 61.5%, up from 48.7% last week.
- Spot 6.5848
- The PBOC is set to impose, with effect from 25th Jan, a required reserve ratio on offshore participant banks with yuan deposits in the mainland, as reported by Bloomberg on Sunday. This represents the latest measure implemented by China policy makers in their efforts to curb foreign speculation against its currency.
- The daily reference rate was raised by 0.07% this morning, the most in 4 weeks.
- USDCNH resumed its decline from last week’s close, dropping by as much as 0.6% to an intraday low of 6.5730 today.
- Spot 8.8583
- Fresh lows in oil prices have resulted in USDNOK bouncing of the 8.7566 low from last week, to an intraday high of 8.8800 this morning.
- USDNOK looks to retest the 9.0000 level again, should the slump in oil persists.
- JP Morgan economists reported last Friday that they expect the Norges Bank to cut its policy rate by 25bps to 0.5% at its 17th Mar meeting.